Rio Tinto has agreed to a 33% cut in iron ore prices with Japanese steel makers, the first such drop in prices in seven years as the global financial crisis slashes demand.
Rio yesterday announced in a statement to the Australian Securities Exchange that Japan’s largest steel maker, Nippon Steel Corporation, had agreed to pay US$97 per dry metric tonne of iron ore.
According to chief executive of Rio Tinto Iron Ore, Sam Walsh, the deal is a practical one given the current state of global markets.
“We believe this settlement is a realistic outcome for both parties, one that reflects the global markets for iron ore and the current challenging market conditions facing our customers,” he said.
“Rio Tinto is pleased to reach this agreement today with Nippon Steel Corporation.”
Nippon also agreed to pay US$112 per tonne for Rio’s premium Pilbara Lump product, which is a 44% drop from 2008 contract prices.
News of the agreement has been cause for optimism among iron ore exporters hoping that the agreement will set a global benchmark for contract prices, which had risen more than fivefold since 1999.